13. Income tax expense

Current income tax liabilities/receivables

The Group entities are subject to corporate income tax. The amount of current tax liability of the Entities is transferred to the appropriate tax authorities. The final settlement of the corporate income tax liabilities of the Group entities for the year 2014 is made within the statutory deadline. According to regulations on considering tax liabilities as past due, tax authorities can verify the correctness of income tax settlements within 5 years from the end of the accounting year in which the tax declaration was submitted.

Deferred income tax asset/liability

In 2014, KREDOBANK SA conducted proceeding related to legal claim described below with the tax authority in Ukraine.

The legal claim concerns the results of tax audit, which covered the period from 1 April 2011 to 30 September 2012. Legal claims mainly concern recognition of the costs related to the transaction of selling loans in the period covered by the inspection as tax deductible expenses, the adequacy of recognition of impairment allowances on loans, the correctness of the settlement of VAT on property sales and withholding tax for the payment of fees for services. The value of disputed claims amounted to UAH 877 thousand (PLN 197 thousand) and the amount of reducing tax loss from previous years - UAH 626 282 thousand (PLN 140 663 thousand). In February 2013, KREDOBANK SA paid a part of the legal claims in the total amount of UAH 439 thousand (PLN 99 thousand). This value is still included in subsequent appeal claims. KREDOBANK SA appealed against the above-mentioned tax decision consecutive to the Regional State Tax Service and The Ministry of Revenue and Duties of Ukraine, and these appeals were rejected. On 2 August 2013, KREDOBANK SA filed a claim against the results of the inspection and applying for annulling the above-mentioned tax decision. On 5 November 2013 the court of first instance issued a favourable verdict for KREDOBANK SA, which accepted a position of the Company, except the correctness of calculation of tax depreciation on tangible fixed assets in the total amount of UAH 336 thousand (PLN 75 thousand). On 26 November 2013, the tax authority appealed to the court of second instance. On 2 April 2014 the court of appeal upheld the decision of the court of first instance favourable for KREDOBANK SA. On 15 April 2014 the tax authority filed a motion for cassation of this judgement to the Higher Administrative Court. On 10 February 2015 Higher Administrative Court issued a favourable verdict for KREDOBANK SA, maintaining above-mentioned decisions of the court of the first and second instance. Tax liability arising from the above-mentioned judgement in the amount of UAH 74 thousand (PLN 17 thousand) will be considered by the Company in the tax return for the year 2014. The judgement is legally valid. There is possible to appeal to the tax authority to Supreme Court of Ukraine.